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13. Discussion – Extended producer responsibility schemes

Based on existing relevant policy measures, the following section will discuss opportunities to apply end-of-life strategies for HFO gases in the Nordics.

13.1 Extended Producer Responsibility Schemes

Since the 2000s, Extended Producer Responsibility (EPR) adaptation has increased rapidly worldwide. In the EU, several directives refer to EPR as a recommended policy instrument for waste management to meet collection and recycling targets. In general, there are four broad categories of EPR instruments directed at policymakers, typically addressed as waste management aspects:
OECD (2014b)
  • Product-take-back requirements – Take-back policies require the producer or retailer to collect the product at the post-consumer stage. Increased product-takeback can be achieved through collection and recycling targets of products or materials by incentivising consumers to return the used products to the selling point.
  • Economic and market-based instruments – Economic and market-based instruments include measures such as deposit-refund schemes, Advanced Disposal Fees (ADF), material taxes, and an upstream combination of taxes and subsidies. In South Korea, ADFs are imposed on producers and importers of hazardous products and/or more difficult to recycle.
  • Regulations and performance standards – For example, requirements for minimum recycled content. Standards can be mandatory or applied by industries through voluntary programs.
  • Accompanying information-based instruments – These policies are developed to indirectly support EPR schemes by raising public awareness. Measures include imposing information requirements on producer responsibility and waste separation.
    OECD (2014b)
Some general benefits of implementing EPR schemes can be highlighted,
Hogg et al (2020)
including:
  • Increased reuse and recycling
  • Increased green product design or eco-design
  • Financing of waste collection and processing systems
  • Reduced cost of utilising recycled materials
  • Job creation
  • Reduced potential health risks from landfills
    Watkins & Gionfra (2020)
EPR schemes often have the fundamental environmental goal to incentivise producers to design more resource-efficient products with reduced environmental impacts,
Watkins & Gionfra (2020)
in line with the Eco-design Directive,
Directive (EU) 2009
and to ensure effective end-of-life collection and environmentally efficient treatment of the waste collected, to increase recycling and preparation for reuse rates.
Watkins & Gionfra (2020)
The latter will be the central focus of the following subsections. Further, there will be a particular focus on take-back solutions and deposit-refund schemes.

13.1.1 Product Take-Back Solutions

Product take-back requirements are the most common EPR scheme, with almost three-quarters of all EPR schemes based on this instrument globally. Take-back solutions can be implemented with different intentions, configurations, and outcomes.
Watkins & Gionfra (2020)
In the last two decades, many countries have enacted product take-back legislation that holds manufacturers responsible for collecting and environmentally sound treatment of end-of-life-span products. In most cases, the main objectives of take-back legislation are to reduce the amount of waste going to landfill by increasing product take-back and creating incentives for environmentally friendly product design.
Esenduran et al (2015)
The main objective of take-back systems developed to facilitate an increased collection, recycling, and proper disposal of HFO substances would most likely be to reduce the amount released to the atmosphere from illegal or improper waste handling, making it slightly different from the typical take-back systems for solid waste. This means that new configurations of take-back solutions might need to ensure an actualised increase in the collection, recycling, and handling of HFO substances. While some take-back solutions are implemented voluntarily to reverse supply chains to facilitate remanufacturing, reuse, recycling, or zero-waste production, voluntary agreements are rarely seen as an efficient approach to create prompt national action. Nonetheless, voluntary and required take-back solutions are considered crucial to closed-loop manufacturing.
Andersen et al (2021)
If prompt action is the objective of addressing end-of-life solutions for HFO substances, concrete legislative requirements for take-back might be necessary.
To support prompt actions on take-back solutions, governments can offer take-back incentives to manufacturers or retailers under a given collection target to minimise environmental pollution, whether the take-back systems are required or voluntary. With an incentivising approach, studies identify that manufacturers will act to increase the number of returned products through investments responding to governmental offers.
Jauhari et al (2021)
By controlling the collection rate appropriately, the manufacturers can achieve production and inventory levels that can be managed economically, and minimum total costs can be achieved.
Jauhari et al (2021)
Challenges are typically addressed using industry 4.0-related technology and planning and scheduling methods.
Andersen et al (2021)
Take-back incentives provided by the government are proven to be an effective policy to increase product reuse. However, in the case of HFOs, the economic incentive must be determined. If there are no incentives for customers (both business-to-consumer (B2C) and business-to-business (B2B)) to return HFO substances (whether it be penalties, subsidies, or other rewards), they will be less likely to assist in the increase of collection, recycling and disposal. In some cases, where handing in containers with HFOs is associated with costs, it might be cheaper for the practitioner to simply ‘free’ the superfluous gas, as this is an ‘efficient’ way to free the container. To what extent such practices are used in the Nordics is unclear. However, such practices are an intentional release of gas, which is prohibited according to the EU F-gas regulation.
Implementing take-back solutions, regardless of the product, will require manufacturers to invest money to increase the product return rate. The investments will be compensated through material cost savings long-term, which will further increase the incentive for take-back systems. However, optimal economic configurations for take-back systems often rely on efficient closed-loop supply chain systems, where the collaborative action of all members engaged in the system is necessary.
Jauhari et al (2021)
Ensuring assistance with the facilitation of new supply chain configurations and facilitating an increased understanding of the overall potential benefits of take-back systems for HFO substances from an economic point of view (whether it is based on penalties or rewards) would likely increase the willingness to participate among manufacturers and retailers.

13.1.2 Deposit-Refund Systems

Deposit-refund systems combine product taxation with a rebate when the product or its packaging is returned for recycling or appropriate disposal. This is usually done by applying a tax per unit of product sales with a subsidy per unit returned for recycling. The deposit-refund approach can address many environmental challenges beyond waste disposal by imposing an up-front fee on production or consumption, using the fee revenues to rebate ‘green’ inputs and mitigation activities.  Deposit-refund systems go beyond bottle-collection and recycling schemes and have been established for lead-acid batteries, motor oil, tires, various hazardous materials, electronics, etc. The deposit-refund scheme can address air and water pollution caused by illegally dumping hazardous waste materials or non-point source pollution. Further, evading taxation is difficult when applied to production or consumption activities. Deposit-refund systems can generally be applied in two ways:
Walls (2011)
  • Downstream deposit-refund systems, where the consumers returning the materials to collection centres are paid the refund. Downstream deposit-refund systems have been shown to transform non-recyclers into diligent recyclers;
  • Upstream deposit-refund systems, where the refund is paid to collectors or directly to re-processors. The upstream approach is considered the most innovative, as these systems are likely to have lower transaction costs and may be less inclined to lead to situations where materials are collected for recycling but are not actually recycled.
    Walls (2011)
Downstream deposit-refund systems are mostly relevant for products out of the B2C market due to the incentive mechanisms whereby consumers are rewarded for product return and circular behaviour.
On the other hand, upstream deposit-refund systems are relevant for B2B and B2G markets, but will often require additional policy measures or incentive structures to ensure increased waste collection. A combination of take-back solutions and upstream deposit-refund systems could enable the desired incentive, as retailers are put in the role of collectors and manufacturers as re-processors. Retailers and manufacturers are incentivised by regulatory requirements on take-back efforts and rewarded with refunds when collecting or recycling/properly disposing of the substance in question.

13.1.3 Developing an EPR Scheme

There is a wide range of aspects to consider when it comes to designing and developing an EPR scheme, hereunder take-back solutions and deposit-refund systems. In developing EPR schemes, all the products covered by an EPR scheme must be clearly defined to ensure the best options for compliance. Product definitions should include the following:
  • Types of products
  • Categories and sub-categories where appropriate
  • Materials
  • Consumer type (household and/or commercial)
    Monier et al (2014)
In the case of the included HFO-containing product groups, it would beneficially clarify all product types covered by the EPR, differentiate products into subcategories based on the type of gas utilised for coolant (including natural alternatives), materials not related to HFO gases in the EPR covered products, and the consumer type.
To ensure that EPR schemes reflect the reality of a given society and ensure a general understanding of responsibilities among EPR-affected producers, it is essential to organise a dialogue with involved and co-responsible stakeholders.
Monier et al (2014)
The following should be taken into consideration:
  • Producers and other stakeholders affected by the EPR scheme must face the same obligations.
  • It can be reasonable to support SMEs and micro-enterprises to ensure a continuous market development flow.
    Watkins & Gionfra (2020)
As HFOs come from different manufacturing sectors and are oriented towards different consumer markets, multiple EPR schemes should be developed based on the product type. This would ease the stakeholder dialogues, as different sectors likely would have differentiating concerns with implementation of EPR schemes.
EPR involves a shift in responsibility (administrative, financial, and/or psychical) from governments or municipalities to producers or Producer Responsibility Organisations (PROs). From a polluters-pays perspective, the definition and role of the polluters (i.e. consumers) shift from an individual directly causing pollution to an economic agent (producers) in EPR schemes, playing a decisive role in reducing pollution.
Monier et al (2014)
The shift in responsibilities is commonly facilitated through individual compliance schemes or Individual Producer Responsibility (ICS/IPR) or collective compliance schemes or Collective Producer Responsibility (CCS).
Watkins & Gionfra (2020)
Monier et al (2014)
ICSs/IPRs are a rare approach in the EU and are limited to instances where one producer sells its products to a limited number of users.
Monier et al (2014)
CCSs/CPRs are much more common than individual schemes and are organised by specific organisations (PROs) that take responsibility for waste collection and treatment on behalf of their members and implement EPR principles. PROs’ responsibility perimeter differs based on the type of waste producers. Often, there is a relevance in distinguishing between household, commercial and industrial waste.
Monier et al (2014)
CPRs tend to be more efficient regarding waste collection and treatment and cost-effective due to pooled resources, economies of scale, etc.
Watkins & Gionfra (2020)
If EPR schemes target total products (all components) or multiple product groups, CCSs or CPRs would be the most suited, as PROs would be able to facilitate proper collection, separation and recycling/disposal of all materials.
The costs of waste management, collection, and treatment of the products covered by an EPR scheme should be covered. In the case of IPR, it is recommended that standard contracts and fee calculation guidelines are set out to ensure fair and equal treatment of the producers. In the case of CPR, PROs should ideally set fees to cover the entire net waste management costs for the products included in the EPR scheme. Any revenue from sales of secondary raw materials or reusable products, both in the case of IPR and CPR, should be subtracted from the costs paid by the producers.
  • Fees may include a fixed element, e.g., a producer membership fee, typically paid annually.
  • If appropriate, product-related fees should be established per product, category, subcategories, and/or material. With this approach, a fee can be paid annually based on the number of products a producer places on the market.
  • Fees can also be modulated based on specific product features, such as recyclability, hazardousness, utilisation of renewable resources, etc. EPR schemes that target product characteristics directly provide the most directive incentives for eco-design increments.
    Watkins & Gionfra (2020)
Obligations placed on producers should be clearly defined to ensure the best options for compliance. The clarification of obligations can be made, utilising a variety of approaches:
  • Producers can be obliged to finance the current waste management system based on an average cost, KPIs, and production output. Cost determination can be based on national, regional, or local waste management costs. Alternatively, producers can be obliged to set up waste management contracts with the regional or municipal waste manager. Contract templates can be developed to ensure easy compliance and implementation.
  • The partial organisational approach, whereunder regional or municipal organisations still are responsible for waste collection, but with financial support from the producers. In some cases, this approach further obliges producers to participate in or facilitate waste activities such as the sorting and selling of secondary raw materials.
  • The full organisational approach obliges producers to take responsibility for waste collection and treatment. This is typically done with direct contracts with waste operators, and the producers keep ownership of the waste and, thereby, any recyclable secondary raw materials.
    Watkins & Gionfra (2020)
While all organisation approaches are valid, utilising the infrastructure already available in the Nordic or other European countries would be beneficial. Measurable targets or KPIs should be set for waste management, collection, and treatment. These targets should be reviewed periodically to ensure a continuation of an increase in recycling and preparation for reuse. Target should consider legislative and supranational mandatory waste collection and treatment targets. Furthermore, measurable targets or KPIs should consider technical and economic feasibility, existing/needed infrastructure, and geographic and demographic characteristics.
Watkins & Gionfra (2020)
KPIs should be differentiated based on the lifespan of the applications where HFOs are used.

13.1.4 Transparency, Monitoring and Enforcement

Transparency of an EPR scheme is crucial in ensuring that EPR targets are met, and so are monitoring EPR schemes' contribution to national and supranational waste management targets. To provide transparency in EPR processes, an adequate monitoring system should be in place, and public authorities must enforce legislative obligations. Publicly available information, e.g., annual PRO reports, can contribute to adequate transparency of the EPR scheme. Such reports should include information on collection methods and amounts, recycling and reuse rates achieved through the EPR scheme, fees charged to producers, costs incurred, revenue from the resale of secondary raw material, and recommendations to consumers and stakeholders on how to increase proper collection and treatment of waste. An adequate monitoring system for EPR schemes is not only beneficial when it comes to determining the net costs of collection and treatment. A monitoring system can further function as an input to the assessment of national waste management targets, contribute to a transparent EPR scheme, and, if relevant, identify any iterations needed for the EPR scheme.
Watkins & Gionfra (2020)
A monitoring system should, at least, entail the following:
  • Detection of free riders, in the form of producers, benefitting but not contributing to the EPR scheme
  • Detection of unfair commercial practices by producers, PROs, and waste management companies 
  • Detection of compliance or nonconformity with EPR targets
    Watkins & Gionfra (2020)
Enforcement of regulative and legislative requirements is crucial, not only in the context of identifying free riders or stakeholders with unfair commercial practices, but also to ensure that citizens trust the waste management system. Enforcement practices related to EPR schemes should entail the following:
    • Penalties for free riders
    • Punishment of unfair commercial practices
    • Fair and sound financial management of EPR schemes
    • Compliance with legislation by all stakeholders involved
      Watkins & Gionfra (2020)
    Establishing a transparent and well-monitored scheme would as well contribute to remedy the current lack of valid HFO market-, use-, and disposal data that this study has experienced.